Asian equities soared on Monday’s opening hours, led by Japan’s Nikkei 225 (+1.6%) and Hong Kong’s Hang Seng index (+0.6%). 

A risk-on rally was observed in most Asian markets except for Shanghai. Safe-haven assets – including gold, silver and US treasuries – took a plunge from five-month highs. EUR/USD surged nearly 2% in the market open before paring some gains subsequently. The US dollar index dived to a four-week low in the 99.10 area, forming a “double bottom” pattern in its daily chart. 

It seems like a ‘relief rebound’ following the result of the French election just a few hours ago, which shows that Macron and Le Pen will go head-to-head in the final round. The first round election result was very much in line with earlier poll results. Macron, an independent centrist, came out on top with 23.9% of the vote ahead of Le Pen, the far-right candidate, on 21.4%. 

This led the market to believe that Macron will continue to lead the race in the second round of the election, and that expectation significantly removes political uncertainties surrounding the EU’s single market, at least in the short term. A strong rally in the euro and other risky assets was an immediate result. But the sustainability of this rally will be tested again in two weeks’ time, when the market embraces a second wave of volatility just like we saw with Brexit and the US election not so long ago. 

EUR/USD (15 mins)

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